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Archive for the 'Taxes' Category


Why You Should Be Investing Your Cash in Real Estate

Monopoly-ChanceAs entrepreneurs find success with their primary business ventures, many search for the right investments for their profits.

Of course, we can and should all start traditional tax preferred vehicles like an IRA and 401k. These are the bedrock of good ‘benefit’ planning for ourselves and our employees. I’m also convinced more entrepreneurs should consider rental real estate as an important part of their portfolio.

I realize many business owners shrug off this concept after the recent downturn in real estate values, but let me list a few reasons that may change your mind:

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Understanding Land Trusts (Part 1)

The land trust is one of the most talked about, but least understood, entity utilized by real estate investors. The reason for this is simple, most attorneys or CPAs have never come across the entity in their professional practice. How can this be?

You might be asking yourself: if the land trust is a legitimate entity used by real estate investors all over the country shouldn’t my local attorney know something about it.  Unfortunately the answer is no, they most likely wouldn’t have a clue and this is because only a handful of states actually recognize a land trust via statute.

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What is the Ideal “Exit Strategy”?

What exactly is meant by the term “exit strategy?” Is it just cool venture capitalist jargon as they take their billion-dollar start-up profitably public? No, the phrase accurately describes the process of knowing when and how “to cash out” a real estate investment.

An exit strategy is the method by which an investor cashes out of an investment. There are five main strategies in physical real estate investment, all of which involve different exits or realizing a return.

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Real Estate Investing with a Solo 401(k)

The self-directed Solo 401k retirement plan offers powerful advantages for real estate investing. The Individual k or Solo 401k is an IRS-qualified retirement plan that has been simplified for the self-employed and small business owner. The structure of the plan gives participants more options than a traditional 401k. The Solo 401k’s investment capability, direct access, loan feature, and tax benefits make it the perfect vehicle for investing in real estate.

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5 Tips to Reduce Your Property Tax Assessment

Investing in income producing property can be the single-most rewarding aspect of getting into real estate. Yet, it also comes with some significant responsibilities including mortgages, maintenance and property taxes. In some cases, annual property taxes can be astronomical for high dollar value properties and regions where the housing market is popular. Additionally, there are some regions where property tax assessments are not handled well, leaving real estate investors and home owners paying far more than the properties are actually worth.

The good news is that there are some ways to reduce your property tax assessment significantly, to offset the costs of ownership. Learn how to deal with property tax assessments the smart way, and reduce their impact on your bottom line.

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Reduce Your Taxes by $10,000 with a Solo 401(k)

If you’re self-employed or have a small business, the idea of a 401(k) may make you jump to two conclusions: “My company is too small” or “I can’t afford it.”  Well, you’re not too small and you can afford it!

A Solo 401(k) is inexpensive to set up and easy to maintain – and it delivers substantial tax and saving advantages.  Use a Solo 401(k) plan if you’re self-employed or run an owner-only business.  You could add multiple owners and a spouse to a Solo 401(k) plan, but if you add full-time employees you’ll need to convert it to a more traditional IRA  plan.

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10 Questions on the New Mortgage Rules

Regulators issued new mortgage rules last week designed to prevent a return to lending practices that helped crater the housing market and brought the financial system to its knees during the past decade.

Here’s a look at some frequently asked questions:

What is a qualified mortgage? Congress amended federal lending laws in 2010 to give greater legal rights to borrowers who get mortgages they can’t afford. The new law, part of the Dodd-Frank financial-regulation overhaul, said if banks made a qualified mortgage — one that meets certain easy-to-identify criteria — regulators and courts would presume lenders had reason to assume a borrower could repay.

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Real Estate, Inflation and the Fiscal Cliff

There’s been a lot of fuss on how the “fiscal cliff” will get the U.S. economy into trouble in 2013. For starters, here’s a thorough explanation of how it can impact the economy.

(Video published by the WSJ on Oct. 31, 2012.)

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Mortgage Interest Deduction on the Chopping Block?

A tax break that has long been untouchable could soon be in for some serious scrutiny. Many home buyers deduct their mortgage interest when assessing their tax bill, a perk that has helped bolster the income of millions of families – and the broader housing market. But as President Obama and Congress try to hash out a deal to reduce the budget deficit, the mortgage interest deduction will likely be part of the discussion.

Limits on a broad array of deductions could emerge in any budget deal.  It is likely that any caps would be structured to aim at high-income households, and would diminish or end the mortgage tax break for many of those taxpayers.

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A Crash Course on Rental Property Tax

One way or another, Uncle Sam is going to get his cut. Count on it. And so will your state and local governments. That said, as you file taxes there are certain things you can do as a real estate investor to help manage your tax bill, and maximize your after-tax return on your investment.

In order to do so, however, you need to understand the primary ways in which investment real estate portfolios get taxed. You must also have a general grasp of some abstract concepts like calculating your tax basis, as well as the depreciation of capital investments. Hey, if this stuff were easy, we’d all be CPAs, right?

Warning: This article will only arm you with enough information to be dangerous. You can click on any of the links for more detailed information directly from the Internal Revenue Service. This article won’t make you an expert. But you can become conversant with the basic terminology, so you can be better prepared for a meeting with your tax advisor.

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The Delaware Series LLC for Real Estate Investors

Following up to our previous article titled, “3 Reasons a Series LLC Should be a Real Estate Investor’s Best Friend“, we now focus on benefits of a Delaware Series LLC.

The Delaware series LLC is a form of a limited liability company that provides liability protection across multiple “series”, each of which is theoretically protected from liabilities arising from the other series.  It is similar to a parent/subsidiary structure, such as GM and it’s various brands.  For example, you could have a master LLC that owns different subsidiaries which in turn own small groups of real estate.  The subsidiaries would shield both the master and other subsidiaries from liability.  Thus, a real estate investor can reduce the exposure to the assets that any one subsidiary owns.

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Investing in Real Estate Using a Self Directed IRA

A growing number of real estate investors are using a self-directed IRA to finance their property purchases nowadays. That’s because a self-directed IRA can provide them with the opportunity to buy real estate and earn rental income without paying early distribution fees.

The Investment Company Institute – the national association of U.S. investment companies, estimates that about $4.7 trillion in IRAs were held in the U.S. last year. Of this, an estimated $94 billion (only 2 percent) are in Self-directed IRAs.

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Real Estate Best Hedge Against ‘Massive Inflation’

“Massive inflation” is poised to strike the U.S. economy and the best hedge against galloping prices won’t be gold but real estate, says the sector’s mogul Donald Trump.

Gold, a fixed asset whose supply does anything but fluctuate, has long been used as a hedge against inflation, although real estate will do a better job going forward due to its availability and current pricing.

“The bottom line is I love real estate,” says Trump.

“I like it because I think you are going to have massive inflation at some point, and to me real estate is a much better hedge against inflation than gold, which you can’t touch.”

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Year-End Checklist for Rental Real Estate

Real estate is one of my absolute favorite areas in the tax law because there is so much flexibility in how to do things to legally maximize the tax benefits available.

Real estate is also one of the most complex areas of the tax law. This makes it easy to overlook important steps, which can lead to missing out on tremendous tax savings.

I recommend reviewing your tax strategy throughout the year, particularly as it relates to real estate. This makes it much easier to make adjustments timely, minimize oversights and reduce stress at the end of the year and tax return time.

With the end of the year approaching quickly, it is an ideal time to implement a year round strategy to review your tax strategy as it relates to your real estate.

Start with my year-end checklist for rental real estate and adapt it to use throughout the year.

Here are a few items from the checklist my team and I use:

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How to Lower Your Property Taxes

Half of all homeowners may be paying too much.  Here’s what you can do about it.

Home prices are still going down in many markets. But your property-tax bill might well be going up.

The good news: There are ways to fight back.

Property taxes across the U.S. have increased by nearly 20% from 2005 to 2009, the most recent data available, according to an April study by the National Association of Home Builders. The median annual real-estate-tax payment was $1,917 in 2009, up from $1,614 in 2005.

Over the same period, home prices in major urban centers fared badly, decreasing 31%, according to the Standard & Poor’s/Case-Shiller 20-City Composite Index.

Property taxes don’t move in lockstep with home values because local governments typically don’t measure values every year and some have limits on annual property-tax increases, says Natalia Siniavskaia, a housing-policy economist at the home-builders group. That means your current property taxes might reflect your home’s value when the market was healthier. Property-tax adjustments lag behind changes in home prices by an average of three years, according to the Congressional Budget Office.

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